National Mineral Development Corporation Limited V. Income Tax Department

WP/4701/2013

AI Insights

The case involves the National Mineral Development Corporation Limited (petitioner), which challenged the reopening of its income tax assessment by the Income Tax Department (respondents). The assessment was reopened under Section 148 of the Income Tax Act, 1961, based on alleged income suppression inferred from price variations in iron ore exports. The petitioner contended that the reopening and subsequent assessments were conducted without proper jurisdiction and were based on erroneous assumptions about income suppression. The court, however, found that these issues were within the jurisdiction of the tax authorities and could be addressed through the statutory appellate process, thus not warranting intervention under Article 226 of the Constitution.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 678354 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 25-02-2013
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income Tax, Delhi vs. Kelvinator of India Limited, Addanki Tiruvenkata Thata Desika Charyulu vs. State of Andhra Pradesh
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: K RAGHAVACHARYULU
• Keywords: Alternative remedy; Assessment Reopening; Income Tax; Jurisdiction; Suppression of Income
• Section: 147; 148; 253; 260-A

Judgement Text

"THE HON’BLE SRI JUSTICE GODA RAGHURAM AND THE HON’BLE SRI JUSTICE M.S.RAMACHANDRA RAO WRIT PETITION No.4701 of 2013 ORDER (Per the Hon’ble Sri Justice Goda Raghuram): The petitioner is an instrumentality of the Union – the National Mineral Development Corporation Limited. The order of the second respondent reopening the Assessment in purported exercise of powers under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’) vide the order dated 16.12.2011; the notice dated 29.12.2011 proposing to pass a fresh Order of Assessment; the consequent Order of Assessment dated 17.02.2012 by the second respondent and the appellate order of the first respondent dated 03.12.2012 confirming the Order of Assessment and rejecting the petitioner’s appeal, are assailed in this writ petition. The Assessment Order by the second respondent dated 17.02.2012 brought to tax specified income allegedly earned by the petitioner on the ground that these were suppressed, on an inference drawn from the fact that there was a huge variation between the comparative prices of iron ore exported by the petitioner to Japan and South Korea and similar exports by a private exporter in relation to exports to China. The Order of Assessment was passed after reopening the assessment, in exercise of the powers under Section 148 of the Act preceded by a due process under Section 147. Aggrieved, the petitioner preferred an appeal to the first respondent which was rejected by the order dated 16.12.2011 confirming the finding that there was a suppression of income. The petitioner has a further right of appeal to the Income Tax Appellate Tribunal under Section 253 of the Act and thereafter on any substantial error of law, to this Court under Section 260-A of the Act. Sri K. Raghavacharyulu, the learned counsel for the petitioner would however strenuously contend that no reasons were either recorded or existed for exercise of powers under Sections 147 and 148 of the Act in reopening the Assessment; that the reopening of the Assessment was in transgression of established principles of law delineated in several binding precedents including Commissioner of Income Tax, Delhi vi. Kelvinator of India Limited[1]; that availability of an alternative remedy (by way of an appeal to the Tribunal under Section 253 of the Act) is per se not a ground for relegating the petitioner to the alternative statutory appellate remedy and declining exercise of jurisdiction under Article 226 of the Constitution; and that having regard to the onerous tax liability imposed on the petitioner and the possibility of affirmation of the primary and appellate orders by the further Appellate Forum of the Tribunal, this Court should intervene exercising jurisdiction under Article 226. It is further contended by the learned counsel for the petitioner that the orders of the primary and appellate authorities are vitiated by errors going to the root of jurisdiction of these authorities since the Assessment was reopened on the basis of no relevant facts legitimizing exercise of jurisdiction; that the Assessment proceeded on an assumption regarding a non- existent and presumptive income, not borne out by the record; an assumption that potential income was a factual income; and similar illegalities vitiate the order of the appellate authority – the first respondent, as well. In a classic judgment on jurisdiction in Addanki Tiruvenkata Thata Desika Charyulu (since deceased) and after him his legal representatives v. State of Andhra Pradesh[2], the Supreme Court approved the classic statement of principle set out in the judgment of Lord Esher in The Queen v. The Commissioner for Special purposes of the Income Tax ((1888) 21 QBD 313), as to when an error going to the root of jurisdiction must be distinguished from error within jurisdiction. The principle, to the extent relevant and material for the purposes of this case reads: “But there is another state of things which may exist. The legislature may intrust the tribunal or body with a jurisdiction, which includes the jurisdiction to determine whether the preliminary state of facts exists as well as the jurisdiction, on finding that it does exist, to proceed further or do something more. When the legislature are establishing such a tribunal or body with limited jurisdiction, they also have to consider, whatever jurisdiction they give them, whether there shall be any appeal from their decision, for otherwise there will be none. In the second of the two cases I have mentioned it is an erroneous application of the formula to say that the tribunal cannot give themselves jurisdiction by wrongly deciding certain facts to exist, because the legislature gave them jurisdiction to determine all the facts, including the existence of the preliminary facts on which the further exercise of their jurisdiction depends, and if they were given jurisdiction so to decide, without any appeal being given, there is no appeal from such exercise of their jurisdiction.\" The Assessing Authority; the first appellate forum, the Commissioner of Income Tax (Appeals) and the further appellate forum, the Tribunal which is the final authority on fact are all entrusted with jurisdiction to determine the jurisdictional fact in the first instance and determining the same in appeals therefrom. If the Assessing Authority and the Commissioner of Income Tax (Appeals) had recorded a finding that the petitioner had suppressed income, a finding which is erroneous, even if on the basis of a fundamentally misconceived inference from the record, such errors in our view are errors within jurisdiction and eminently amenable to further appellate scrutiny and correction. These cannot be said to be errors that go to the root of jurisdiction. A finding as to suppression of income is not finding regarding a jurisdictional fact. It is an axiomatic principle that an authority invested with the power to decide is accommodated the authority to come to an erroneous conclusion. It is in recognition of the fallibility of primary and appellate authorities that a further appellate jurisdiction is created under the Act. Every error within jurisdiction is not to be subjected to judicial review, as that would cripple the hierarchical principle on which our system of adjudication is normatively founded. The extraordinary jurisdiction of this Court under Article 226 of the Constitution must be preserved to oversight serious errors which are not properly amenable to the hierarchic statutory remedies available. In the case before us, the petitioner has not chosen to challenge initiation of proceedings for reopening of the Assessment by way of prophylactic remedy, at that stage. It has chosen to subject itself to an order of Assessment. What is more, the petitioner has also chosen to pursue the further appellate remedy before the Commissioner of Income Tax (Appeals) and at this stage seeks to cavil that exercise of the original and appellate jurisdictions is faulty. The alleged errors of the primary and appellate authorities are eminently reviewable in appeal by the Tribunal. As the petitioner has an effective alternative statutory remedy by way of an appeal under Section 253 of the Act before the Tribunal, we are disinclined to exercise jurisdiction under Article 226 of the Constitution. The learned counsel for the petitioner seeks liberty to urge all contentions of fact and law before the Tribunal. No such liberty is required. The petitioner is always at liberty to urge all positions of fact and law and interpretations of the material on record before the Tribunal, which is a body invested with the jurisdiction to go into factual and legal aspects. The petitioner is also at liberty to file a memorandum of written submissions, if it so desires, to sensitize the Tribunal of the controversy in issue. On the aforesaid analysis, we find no merit in this writ petition and it is accordingly dismissed at the stage of admission, after hearing the learned counsel for the petitioner – Sri K. Raghavacharyulu and the learned Standing Counsel for Income Tax – Sri J.V. Prasad. We note that the respondent Revenue has filed its counter but in the view we are taking, we are not going into the merits of the competing contentions with regard to the alleged error and justification of the validity and vitality of orders of the primary and appellate authorities as these are more appropriately pursued before the Tribunal. No costs. JUSTICE GODA RAGHURAM Date: 25.02.2013 JUSTICE M.S.RAMACHANDRA RAO va [1] (2010) 2 Supreme Court Cases 723 [2] AIR 1964 Supreme Court 807 "